As finance ministers of the G-20 gear up for their Argentine meeting this week, Christine Lagarde the International Monetary Fund (IMF) managing director has opined that opportunity exist for nations to take advantage of global growth in three major areas, which are global trade, emerging market vulnerabilities, and the impact of technology on jobs.
In Lagarde’s article titled “Shifting Tides: Policy Challenges and Opportunities for the G-20,” released Wednesday she urged the ministers to be inspired by the words of Claude Monet, an artist who once said, “I worked without stopping, for the tide at this moment is just as I need it.”
According to her, the group of 20 finance ministers who will gather this week at the banks of the Rio de la Plata in Buenos Aires should take advantage of global growth before the tides change.
Referring to the IMF’s world economic outlook released Monday, which confirmed the April forecast of 3.9 percent global growth for 2019, Lagarde said the outlook “may be the high-water mark” as growth is beginning to slow in the Euro Area, Japan, and the United Kingdom.
“US growth, which has been boosted by the recent fiscal stimulus, is projected to moderate in the medium term. In the emerging markets, growth is now more uneven than it was in April, due in part to rising oil prices and currency pressures,” she said.
Her position on global trade indicates that trade tensions are already leaving a mark, but the extent of the damage depends on what policymakers do next.
In April, the IMF warned against the self-inflicted economic wounds that result from protectionist measures. Unfortunately, the rhetoric has morphed into reality, and a series of tariffs and counter-tariffs have gone into effect over the last month. Recent data from Europe and Asia points to a decrease in new export orders and wavering confidence among some car-exporting countries, including Germany.
The IMF’s G-20 surveillance note, also released Wednesday, simulates four hypothetical trade scenarios for the global economy. One scenario has it that, if all currently announced tariffs go into effect, global output would be reduced by 0.1 percent in 2020. “And if investor confidence is shaken by these tariffs, our simulation shows that global GDP could decrease by ½ percent or roughly US$430 billion below the current projection for 2020,” Lagarde noted.
While noting that all countries will ultimately be worse off in a trade conflict, the IMF sees the US economy especially vulnerable because so much of its global trade will be subject to retaliatory measures. And GDP loss is not the only cost.
“Amidst the churn of trade tensions, we are now in danger of losing sight of the horizon. As I said recently, “The future of trade is the future of data.” Modernizing trade rules to address intellectual property rights and adopting innovative agreements on e-commerce and digital services should be at the centre of trade discussions.
Policymakers can use this G-20 meeting to move past self-defeating tit-for-tat tariffs and instead develop multilateral solutions that will improve the global trading system.”
She therefore urged the G-20 nations to build a solid economic foundation as reliable bedrock following unfolding economic tides, thereby continuing to make a positive difference for billions of people around the world.